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Weekly Forex Forecast (March 13 – 17, 2017)

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The EURUSD bulls finally did it. After several failed attempts to breach the 1.0635 area, Friday’s late session surge put the single currency well above the mark.

Yes, there was some profit taking into the close, but that isn’t abnormal especially given Friday’s 130 pip rally. At the end of the day, the pair still managed a close above the 1.0635 handle, which turns our attention higher this week.

With that said, there was a minor resistance level that came into play just before the weekend. The 1.0680 area has acted as a pivot of sorts since January 26th. It also played a role in capping the January 12th advance.

The tight range between 1.0635 and 1.0680 makes playing Friday’s break more difficult. Sure, you could buy on a retest of 1.0635 as new support, but a target of just 45 pips isn’t very appealing.

As such, I’ll stand aside for now and see what comes of last week’s breakout. The close above 1.0635 leaves me cautiously bullish for now, but I need to see more from buyers before I’m willing to consider an entry.

This Wednesday is the highly anticipated Fed rate decision and statement. The events kick off at 2 pm EST and are sure to stir things up for the U.S. dollar, so tread carefully if you plan to take on USD exposure. Also, Draghi speaks on Monday at 9:30 am EST.

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EURUSD tight range

After carving out what appeared to be a bullish rejection candle on March 3rd, GBPUSD buyers failed to follow through. The pair slipped below the 1.2200 support area early last week and never managed to recover.

From here a retest of 1.2200 is likely to attract offers. The region formerly served as support between December 28th of last year and January 3rd. It then forced buyers to retreat between the 11th and 13th of January.

While there is some support in the 1.2130 area, the next key level doesn’t come in until 1.2000. The region has been a key factor for the pair, first attracting bids on the October 7th (2016) crash and later as the (current) 2017 low.

Just like the EURUSD above, Wednesday’s FOMC is bound to have an impact on the GBPUSD. With this in mind, I’ll stay on the sideline and wait for the dust to settle.

GBPUSD resistance

I mentioned the USDJPY on Friday following the non-farm payroll report. Despite a positive initial response to the numbers, the selling pressure was too much for buyers to handle.

By the time I got around to commenting on the pair, buyers were already struggling to maintain the 115.10 handle. This is an area I mentioned on Wednesday as a reason to stay on the sideline despite some recent bullish developments.

Given Friday’s bearish rejection from 115.10, a return to former trend line resistance near 114.20/30 seems likely. Whether the area can now hold up as new support is yet to be seen, but if it doesn’t all eyes will turn toward the 113.25 region.

The only thing that will turn me bullish here is a daily close above 115.10. Such a break would expose the next resistance level at 117.00.

However, I’d be surprised if we see a meaningful move from the USDJPY before the middle of the week. On Wednesday we have the FOMC at 2 pm EST followed by the BoJ decision during the Tokyo session.

I’ll wait to see how things play out later this week. The current range is too narrow, and the upcoming parade of central banks is sure to cause unfavorable conditions.

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USDJPY bearish rejection

The EURJPY found its footing last week. In fact, the past two weeks have been quite impressive, tallying over 400 pips since the low at 118.23.

I first mentioned the pattern you see below on March 2nd. At the time the pair was trading at 120.30 and was fast approaching the confluence of resistance at 121.20. The area is the intersection of two key levels (shown below) and is also the 50% retracement from the December 2016 high to the current 2017 low.

With prices now well above 121.20 on both a daily and weekly closing basis, the area will likely act as support if tested. While a 120 pip rotation lower may seem unlikely, the pair is also a bit overstretched as it’s currently trading 180 pips above the mean.

Support for the week comes in at 121.20 while key resistance lies at 123.85. There is also a minor resistance near 122.70 that could become a factor.

EURJPY new support

The AUDJPY broke free from a rising wedge pattern last week. I mentioned the Wednesday breakdown which left us watching for a retest of the 86.50 area as new resistance.

Friday’s bearish rejection of support turned resistance might have given us just that.

But there was also another level at work on Friday. The trend line that extends from the February high is what capped the post-NFP advance. So much so that I decided to enter short at 86.99.

There were a few reasons for my decision, all of which were outlined in the member’s area as things unfolded. To be succinct, the retest of the February trend line combined with a move that exceeded the average daily range meant my risk was limited.

My one requirement to hold the position was a daily close below 86.50. Sure enough, sellers held their ground and managed to drive the pair below this level before the close. Whether or not I add to the short position will depend on how things look in the first 24 hours of the new week.

If former wedge support continues to hold as resistance, we could see a move toward the 85.35 handle. This area stands out via the price action between early January and mid-February. A close below 85.35 would pave the way for a run at the wedge bottom at 83.74.

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AUDJPY wedge pattern

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